UGLY DUCKLING CORPORATION
                                       TO
                          HARRIS TRUST AND SAVINGS BANK
                                     Trustee

                          Second Supplemental Indenture
                           Dated as of April 15, 2000
                                       To
                                    Indenture

                          Dated as of October 15, 1998

                      11% Subordinated Debentures due 2007

     SECOND  SUPPLEMENTAL  INDENTURE,  dated as of April 15, 2000,  between Ugly
Duckling  Corporation,  a corporation duly organized and existing under the laws
of the State of Arizona  (herein  called the  "Company"),  having its  principal
office at 2525 East Camelback  Road,  Suite 500,  Phoenix,  Arizona  85016,  and
Harris  Trust and Savings  Bank,  an Illinois  banking  corporation,  as Trustee
(herein called the "Trustee")  under the Indenture  dated as of October 15, 1998
between  the  Company  and the  Trustee  (as  amended  from  time to  time,  the
"Indenture").


<PAGE>
                             Recitals of the Company

     The Company has  executed  and  delivered  the  Indenture to the Trustee to
provide for the issuance from time to time of its unsecured debentures, notes or
other evidences of indebtedness (the "Securities"), said Securities to be issued
in one or more series as in the Indenture provided.

     Pursuant to the terms of the Indenture,  the Company desires to provide for
the  establishment  of a new  series  of its  Securities  to be known as its 11%
Subordinated Debentures due 2007 (herein called the "Debentures"),  the form and
substance of such Debentures and the terms, provisions and conditions thereof to
be set  forth  as  provided  in  the  Indenture  and  this  Second  Supplemental
Indenture.

     All things  necessary  to make this Second  Supplemental  Indenture a valid
agreement  of the  Company,  and to make the  Debentures,  when  executed by the
Company and authenticated and delivered by the Trustee, the valid obligations of
the Company, have been done.

     Now, Therefore, This Second Supplemental Indenture Witnesseth:

     For and in consideration of the premises and the purchase of the Debentures
by the Holders thereof, and for the purpose of setting forth, as provided in the
Indenture,  the form and substance of the Debentures  and the terms,  provisions
and conditions  thereof,  it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Debentures, as follows:


                                  ARTICLE ONE

                 General Terms and Conditions of the Debentures

     Section 101. There shall be and is hereby authorized a series of Securities
designated  the "11%  Subordinated  Debentures  due 2007",  limited in aggregate
principal  amount  to  $27,500,000,  which  amount  shall be as set forth in any
written order of the Company for the  authentication and delivery of Debentures.
The Debentures  shall mature and the principal shall be due and payable together
with all accrued and unpaid  interest  thereon on April 15,  2007,  and shall be
issued in the form of registered  Debentures without coupons in denominations of
$1.00 and any integral multiple thereof.

     Section 102. Except as provided in Section 103 herein, the Debentures shall
be issued in certificated form.  Principal and interest on the Debentures issued
in  certificated  form will be payable,  the transfer of such Debentures will be
registrable and such Debentures will be exchangeable for the Debentures  bearing
identical terms and provisions at the Corporate Trust Office of the Trustee from
time to time, which is initially in Chicago, Illinois;  provided,  however, that
payment of interest  may be made at the option of the Company by check mailed to
the registered holder at such address as shall appear in the Security Register.

<PAGE>

     Section 103. Each Debenture will bear interest at the rate of 11% per annum
from the original date of issuance until the principal  thereof  becomes due and
payable,  and on any overdue  principal,  payable  semiannually  on April 15 and
October 15 of each calendar year (each, an "Interest Payment Date"),  commencing
on  October  15,  2000,  to the  person  in whose  name  such  Debenture  or any
predecessor  Debenture is  registered,  at the close of business on each April 1
and October 1 next  preceding  such  Interest  Payment  Date.  Any such interest
installment not punctually paid or duly provided for shall forthwith cease to be
payable to the  registered  holders on such Regular Record Date, and may be paid
to  the  person  in  whose  name  the  Debenture  (or  one or  more  Predecessor
Securities)  is registered at the close of business on a Special  Record Date to
be fixed by the  Trustee  for the  payment of such  defaulted  interest,  notice
whereof shall be given to the registered holders of the Debentures not less than
10 days prior to such  Special  Record  Date,  or may be paid at any time in any
other lawful manner not  inconsistent  with the  requirements  of any securities
exchange on which the Debentures  may be listed,  and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.

     The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. Interest will accrue from the date of
original issuance to, but not including, the relevant payment date. In the event
that any date on which  interest is payable on the  Debentures is not a Business
Day,  then  payment  of  interest  payable on such date will be made on the next
succeeding  day which is a  Business  Day (and  without  any  interest  or other
payment  in  respect  of any such  delay),  in each case with the same force and
effect as if made on such date.

     Section 104. The  Debentures  shall be defeasible  pursuant to Section 1302
and Section 1303 of the Indenture.


                                  ARTICLE TWO

                          Redemption of the Debentures

     Section 201. The Debentures will be redeemable at any time and from time to
time prior to maturity at the option of the Company, as a whole or in part, upon
not less than 30 nor more than 60 days' notice,  at the  principal  amount to be
redeemed, together with accrued interest to the date fixed for redemption.


                                 ARTICLE THREE

                              Additional Covenants

     Section 301.  Definitions.  For purposes of this Article  Three,  except as
otherwise expressly provided or unless the context otherwise requires:

     "Consolidated  Net  Worth"  as of  any  date  of  determination  means  the
consolidated   stockholders'   equity  of  the  Company  and  its   consolidated
Subsidiaries,   as  determined  in  accordance   with  GAAP,   plus  all  Junior
Subordinated Obligations of the Company and its consolidated Subsidiaries.

<PAGE>

     "GAAP" means generally accepted accounting  principles in the United States
of America as in effect from time to time.

     "Junior  Subordinated  Obligation" means any indebtedness of the Company or
its Subsidiaries that by its terms is expressly subordinated in right of payment
to the Debentures.

     Section 302.  Minimum Equity.  The Company shall, at all times while any of
the Debentures remain Outstanding,  maintain  Consolidated Net Worth of at least
$100,000,000.


                                 ARTICLE FOUR

                               Form of Debentures

     Section 401. The Debentures and the Trustee's certificate of authentication
to be endorsed thereon are to be substantially in the following form:

                               [INSERT OID LEGEND]

                            UGLY DUCKLING CORPORATION

No.                                                    $
   ---------------------------------                    ------------------------


CUSIP NO.                         Date of Original Issuance: __________ __, 2000
         -----------------

     Ugly Duckling Corporation,  a corporation duly organized and existing under
the laws of Delaware  (herein  called the  "Company,"  which term  includes  any
successor  Person  under  the  Indenture  hereinafter  referred  to),  for value
received,  hereby promises to pay to ______________,  or registered assigns, the
principal  sum of  ___________  Dollars on April 15,  2007,  and to pay interest
thereon  from the  original  date of issuance  or from the most recent  Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on April 15 and October 15 in each year,  commencing  October 15,  2000,  at the
rate of 11% per annum,  until the principal hereof is paid or made available for
payment.  The interest so payable,  and punctually paid or duly provided for, on
any Interest  Payment Date will, as provided in such  Indenture,  be paid to the
Person in whose name this Security (or one or more  Predecessor  Securities)  is
registered  at the  close  of  business  on the  Regular  Record  Date  for such
interest,  which  shall be the April 1 or October 1  (whether  or not a Business
Day), as the case may be, next  preceding  such Interest  Payment Date. Any such
interest not so punctually  paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular  Record Date and may either be paid to the
Person in whose name this Security (or one or more  Predecessor  Securities)  is
registered at the close of business on a Special  Record Date for the payment of
such  Defaulted  Interest to be fixed by the Trustee,  notice  whereof  shall be
given to Holders  of  Securities  of this  series not less than 10 days prior to
such Special  Record Date, or be paid at any time in any other lawful manner not
inconsistent  with the  requirements  of any  securities  exchange  on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.

<PAGE>

     Payment of the principal of (and premium,  if any) and any such interest on
this Security will be made at the office or agency of the Company maintained for
that purpose in Chicago, Illinois, in such coin or currency of the United States
of America as at the time of payment is legal  tender for  payment of public and
private debts;  provided,  however, that at the option of the Company payment of
interest  may be made by check  mailed to the  address  of the  Person  entitled
thereto as such address shall appear in the Security Register.

     Reference  is hereby made to the further  provisions  of this  Security set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

     Unless the  certificate of  authentication  hereon has been executed by the
Trustee  referred to on the reverse  hereof by manual  signature,  this Security
shall  not be  entitled  to any  benefit  under  the  Indenture  or be  valid or
obligatory for any purpose.

     In Witness  Whereof,  the  Company has caused  this  instrument  to be duly
executed.

                                                UGLY DUCKLING CORPORATION


                                                By
                                                  ------------------------------
Attest:


---------------------------

<PAGE>
     Form of Reverse of Security.

     This  Security  is one of a duly  authorized  issue  of  securities  of the
Company (herein called the "Securities"), issued and to be issued in one or more
series  under an  Indenture,  dated as of October  15, 1998  (herein  called the
"Indenture",  which  term  shall  have  the  meaning  assigned  to  it  in  such
instrument),  between the Company and Harris Trust and Savings  Bank, as Trustee
(herein  called the "Trustee",  which term includes any successor  trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights,  limitations of rights,  duties and immunities thereunder
of the Company,  the Trustee and the Holders of the  Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.  This
Security  is  one of the  series  designated  on the  face  hereof,  limited  in
aggregate principal amount to $27,500,000.

     The Securities of this series are subject to redemption  upon not less than
30 days' notice by mail,  at any time, as a whole or in part, at the election of
the  Company,  at a  Redemption  Price  equal to 100% of the  principal  amount,
together with accrued interest to the Redemption Date, but interest installments
whose Stated  Maturity is on or prior to such Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of record
at the close of business on the relevant  Record  Dates  referred to on the face
hereof for such interest  installments,  all as provided in the  Indenture.  The
Indenture  provides that a notice of redemption may be given that is conditional
upon the  receipt by the Trustee on or prior to the  Redemption  Date of amounts
sufficient  to pay  principal  of, and  premium,  if any,  and  interest on, the
Securities  to be  redeemed,  and that if such  amounts  shall  not have been so
received,  said notice  shall be of no force and effect,  the  Securities  to be
redeemed will not become due and payable on the Redemption Date, and the Company
will not be required to redeem such Securities on such date.

     In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the  unredeemed  portion  hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

     The Securities of this series are  subordinate in right of payment,  in the
manner  and to the extent set forth in the  Indenture,  to the prior  payment in
full of all Senior  Indebtedness of the Company. To the extent and in the manner
provided in the Indenture,  Senior  Indebtedness must be paid before any payment
may be made to any  Holder  of this  Security.  Any  Holder  by  accepting  this
Security  agrees to the  subordination  and  authorizes  the  Trustee to give it
effect.

     The Indenture contains  provisions for defeasance at any time of the entire
indebtedness  of this  Security or certain  restrictive  covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.

     If an Event of Default  with  respect to  Securities  of this series  shall
occur and be  continuing,  the principal of the Securities of this series may be
declared  due and  payable in the manner  and with the  effect  provided  in the
Indenture.

<PAGE>

     The Indenture  permits,  with certain  exceptions as therein provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Company  and the rights of the  Holders of the  Securities  of each series to be
affected under the Indenture at any time by the Company and the Trustee  without
the consent of any Holders in certain limited cases, and with the consent of the
Holders  of a  majority  in  principal  amount  of the  Securities  at the  time
Outstanding  of each series to be affected  subject to certain  exceptions.  The
Indenture  also  contains   provisions   permitting  the  Holders  of  specified
percentages  in principal  amount of the  Securities  of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance  by the Company with certain  provisions of the Indenture and certain
past defaults  under the Indenture and their  consequences.  Any such consent or
waiver shall be conclusive and binding upon the Holder of this Security and upon
all  future  Holders  of this  Security  and of any  Security  issued  upon  the
registration  of  transfer  hereof or in  exchange  herefor  or in lieu  hereof,
whether or not notation of such consent or waiver is made upon this Security.

     As provided in and subject to the provisions of the  Indenture,  the Holder
of this  Security  shall not have the right to  institute  any  proceeding  with
respect to the Indenture or for the  appointment of a receiver or trustee or for
any other remedy thereunder,  unless such Holder shall have previously given the
Trustee  written  notice of a  continuing  Event of Default  with respect to the
Securities of this series,  the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the  Trustee  to  institute  proceedings  in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have  received  from the Holders of a majority in principal  amount of
Securities of this series at the time Outstanding a direction  inconsistent with
such  request,  and shall have failed to institute any such  proceeding,  for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit  instituted  by the Holder of this  Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

     No reference  herein to the  Indenture and no provision of this Security or
of the Indenture  shall alter or impair the obligation of the Company,  which is
absolute and unconditional, to pay the principal of and any premium and interest
on this  Security  at the times,  place and rate,  and in the coin or  currency,
herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth,  the transfer of this Security is registrable  in the Security  Register,
upon  surrender of this Security for  registration  of transfer at the office or
agency of the  Company in any place where the  principal  of and any premium and
interest on this  Security are payable,  duly endorsed by, or  accompanied  by a
written  instrument  of  transfer  in form  satisfactory  to the Company and the
Security  Registrar  duly  executed by the Holder  hereof or his  attorney  duly
authorized in writing,  and thereupon one or more new  Securities of this series
and of like  tenor,  of  authorized  denominations  and for the  same  aggregate
principal amount, will be issued to the designated transferee or transferees.

<PAGE>

     The Securities of this series are issuable only in registered  form without
coupons in denominations of $1.00 and any integral multiple thereof. As provided
in  the  Indenture  and  subject  to  certain  limitations  therein  set  forth,
Securities of this series are exchangeable for a like aggregate principal amount
of  Securities  of this  series  and of like  tenor  of a  different  authorized
denomination, as requested by the Holder surrendering the same.

     No service  charge shall be made for any such  registration  of transfer or
exchange,  but the Company may require  payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the
Company,  the  Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this  Security is  registered  as the owner  hereof for all
purposes,  whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

     All terms used in this Security  which are defined in the  Indenture  shall
have the meanings assigned to them in the Indenture.


                                  ARTICLE FIVE

                          Original Issue of Debentures

     Section 501.  Debentures in the aggregate  principal amount of $27,500,000,
may, upon execution of this Second Supplemental  Indenture, or from time to time
thereafter,  be  executed  by the  Company  and  delivered  to the  Trustee  for
authentication,  and the Trustee shall thereupon  authenticate  and deliver said
Debentures to or upon the written order of the Company,  signed by its Chairman,
its President,  or any Vice President and its Treasurer, an Assistant Treasurer,
its  Secretary  or an  Assistant  Secretary,  without any further  action by the
Company.


                                  ARTICLE SIX

                         Application of Article Fourteen

     Section 601. The Debentures will be subject to the subordination provisions
of Article Fourteen of the Indenture. The Debentures will be pari passu with the
12% Subordinated Debentures due 2003 previously issued under the Indenture.  The
indebtedness under the Senior Secured Loan Agreement,  dated as of May 14, 1999,
as  amended  from time to time,  by and among the  Company,  the  Lenders  party
thereto, and the Trustee will be Designated Senior Indebtedness.


                                 ARTICLE SEVEN

                           Paying Agent and Registrar

     Section 701.  The Trustee will be the Paying  Agent,  transfer  agent,  and
Registrar for the Debentures.

<PAGE>
                                 ARTICLE EIGHT

       Interest and Original Issue Discount Reporting, Backup Withholding

     Section 801. On or before  January 31  following  each  calendar  year with
respect  to which  there  are  Outstanding  Debentures  or such  other  due date
prescribed therefor,  as advised to the Trustee by the Company, the Trustee will
prepare and mail to each Holder of Outstanding Debentures at any time during the
preceding  calendar  year  Forms  1099-INT  and  1099-OID  or such  other  forms
prescribed  therefor by the Internal Revenue Service,  as advised to the Trustee
by the  Company,  containing  such  information  as  instructed  by the Company,
including the information  contained in Section 1009 of the Indenture,  together
with any letter prepared by the Company  explaining tax issues relating  thereto
to the extent not otherwise prohibited by law. Further, on or before February 28
following  each  calendar  year with  respect  to which  there  are  Outstanding
Debentures or such other due date prescribed therefor, as advised to the Trustee
by the Company,  the Trustee  will  prepare and file with the  Internal  Revenue
Service or any other relevant taxing authority, as advised to the Trustee by the
Company, by magnetic tape or other required  transmission  source, as advised to
the Trustee by the Company,  containing the aforementioned information furnished
by the Company.

     Section  802.  During each  calendar  year with  respect to which there are
Outstanding   Debentures,   the  Trustee  will  satisfy  all  applicable  backup
withholding  rules in connection  with payments made or deemed made with respect
to the Debentures including, without limitation,  payments of interest, accruals
of original issue discount,  and payments  associated with redemptions and other
dispositions of Debentures.


                                  ARTICLE NINE

                                Sundry Provisions

     Section  901.  Except  as  otherwise  expressly  provided  in  this  Second
Supplemental  Indenture  or in the  form  of  Debentures  or  otherwise  clearly
required by the context hereof or thereof, all terms used herein or in said form
of Debentures that are defined in the Indenture shall have the several  meanings
respectively assigned to them thereby.

     Section 902. The Indenture,  as previously supplemented and as supplemented
by  this  Second  Supplemental  Indenture,  is  in  all  respects  ratified  and
confirmed,  and this Second  Supplemental  Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein provided.

     This  instrument  may be  executed in any number of  counterparts,  each of
which so executed shall be deemed to be an original,  but all such  counterparts
shall together constitute but one and the same instrument.

<PAGE>

     In Witness Whereof, the parties hereto have caused this Second Supplemental
Indenture to be duly executed all as of the day and year first above written.


                                                UGLY DUCKLING CORPORATION


                                                By
                                                  ------------------------------
Attest:


---------------------------

                                                HARRIS TRUST AND SAVINGS BANK,
                                                As Trustee


                                                By
                                                  ------------------------------
Attest:


---------------------------

<PAGE>


State of Arizona                    )
                                    ) ss:
County of Maricopa                  )

         On  the  ____  day  of  April,   2000,   before  me   personally   came
_____________________________,  to me  known,  who being by me duly  sworn,  did
depose and say that she/he is the ________________ of Ugly Duckling Corporation,
one  of  the  corporations   described  in  and  which  executed  the  foregoing
instrument;  and that she/he signed her/his name thereto by the authority of the
Board of Directors of said Corporation.


                                                        ------------------------
                                                        Notary Public

Official Seal

State of ___________                )
                                    )ss:
County of _________                 )

         On  the  ____  day  of  April,   2000,   before  me   personally   came
_____________________________,  to me  known,  who being by me duly  sworn,  did
depose and say that she/he is the  ________________  of Harris Trust and Savings
Bank,  one of the  corporations  described in and which  executed the  foregoing
instrument;  that  she/he  knows  the  seal of said  corporation;  that the seal
affixed to said  instrument is such  corporate  seal;  that it was so affixed by
authority of the Board of Directors of said corporation;  and that she/he signed
her/his name thereto by like authority.


                                                        ------------------------
                                                        Notary Public

Official Seal